Observations on economics, the academy, the wider world, and things that run on rails.

29.7.15

IN THE PUBLIC INTEREST TO LET IT CRUMBLE.

It's late July, and again Congress are dilly-dallying about re-authorizing the so-called Highway Trust Fund. First, various guardians of the public purse have engaged in the usual maneuvering to attach irrelevant amendments to the transportation bill, hoping that their colleagues and the President will sign off on crap in their sandwich rather than go hungry.

As of this morning, a relatively clean, meaning there's only transportation pork in it, bill that will inter alia extend the Highway Trust Fund for three months, might clear Congress. And there's material for a future post buried in the story -- the federal motor fuels taxes are per unit. With fuel prices fluctuating, ad valorem taxes may not provide sufficient resources to buy future pork, so four of our political masters propose to index the motor fuel taxes to general inflation.

The legislation, proposed by Reps. Jim Renacci, R-Ohio, Bill Pascrell, D-N.J., Reid Ribble, R-Wis., and Dan Lipinski, D-Ill., if passed, would index gas and diesel user fees to inflation. Additionally, the legislation calls for the creation of a bipartisan, bicameral Transportation Commission no later than Sept. 1, 2015.

Funding through the Highway Trust Fund comes from the federal gas tax, that hasn’t been raised since 1993. Some industry stakeholders, such as AAA, favor an increase in the federal gas taxing order to keep up with inflation while detractors argue fuel-efficient cars and the growing popularity of hybrids no longer make a tax increase viable solution.

The lack of funding has created an environment for creativity. Several states over the course of the last several years have raised the state fuel taxes to make up the difference for a lack of federal funding; others have postponed, delayed or extended projects across multiple construction seasons.

Thus, if the Highway Trust Fund is worth saving, it ought to be set up in such a way as to hold the highways in trust. Thus: Special movement permits for any trailer exceeding 40 feet. Permit fee to be substantially higher if the movement can be by rail over part or all of the trip. Federal excise tax on retreaded tires. And some money devoted to improving railroad tracks for faster trains, with the stipulation that the owning railroads be allowed to path intermodal trains at speeds of 90 or 100 mph on those tracks.

I haven't seen any arguments that would cause me to change my position. I found an interesting confession from Iowa's director of the state department of transportation, Paul Trombino.

I said the numbers before. 114,000 lane miles, 25,000 bridges, 4,000 miles of rail. I said this a lot in my conversation when we were talking about fuel tax increases. It’s not affordable. Nobody’s going to pay.We are. We’re the ones. Look in the mirror. We’re not going to pay to rebuild that entire system.And my personal belief is that the entire system is unneeded. And so the reality is, the system is going to shrink.There’s nothing I have to do. Bridges close themselves. Roads deteriorate and go away. That’s what happens.And reality is, for us, let’s not let the system degrade and then we’re left with sorta whatever’s left. Let’s try to make a conscious choice – it’s not going to be perfect, I would agree it’s going to be complex and messy – but let’s figure out which ones we really want to keep.And quite honestly, it’s not everything that we have, which means some changes.

City Lab offer elaboration, and additional evidence that per capita miles traveled have decreased, and yet states put money into expanding the network rather than repairing the existing roads. (That decision is not baseless, perhaps there are parts of a county or a state where human activity is stressing the existing network, and repairs are deferred or implicitly cancelled in the declining parts.)

As if school districts don't cope with shrinking enrollments by furloughing teachers and closing schools? As if highway commissions don't cope with shifting populations by deferring maintenance on less-travelled roads? Tollway privatization is no panacea: a regulated toll corporation that is not allowed to earn the replacement cost of its capital will be no more use than a tollway authority that earns insufficient revenues to rebuild the roads or a highway trust fund that does not allocate funds efficiently. On the other hand, this debate might be a good one to start. The freight railroads have recently begun to earn the replacement cost of their capital. Is it too much to ask that the highway system pass a similar test?

Eliminating federal funding would also force states to abandon needlessly wasteful projects. One consequence of the DOT's need-based funding is that it encourages states to compete for dollars by wildly overstating how much infrastructure they actually need, even as the actual need continues to decline. Tolling would further reduce infrastructure demand by encouraging carpooling, shorter commutes, and alternative modes of transportation. With the big federal dollars unavailable, states will discover surprisingly quickly how many of their crucial infrastructure projects are not actually so crucial after all.

First, we need to get more trucks off highways, since they do far more damage to the road than cars. Properly calibrated tolls should help to discourage long-haul shipping by truck, but in order for there to be an alternative, we need to beef up our rail infrastructure. The current state of rail freight in the United States is atrocious: it can take more than 30 hours for a train to pass through Chicago. A relatively small amount of investment will go a long way towards shifting more freight from the roads to the rails, thereby vastly decreasing maintenance costs for the roads we have.

Second, we need to provide a path forward for auto-dependent cities and suburbs. While the Obama administration already proposed an ambitious high-speed rail plan in 2009, the exorbitant costs involved leave it unlikely to be realized anytime soon. Instead, we should focus on making better use of existing passenger rail infrastructure, which is far too often surrounded by parking lots instead of residences and workplaces. To this end, we should set up a fund to incentivize transit-oriented development by subsidizing low-parking, high-density projects near regional rail and rapid transit.

Regular readers will recognize in the second paragraph the Cold Spring Shops "Free Rein to 110" campaign for a network of frequent, connecting regional and suburban trains using existing motive power and coaching stock. The first paragraph is a vain hope unless highway commissioners don't create highways that will be torn up by heavy trucks bypassing the toll roads. In the Northeast, anyone who has used Interstates 84, 81, or 80 knows of what I speak: those roads are not tolled, but much of Interstate 95 and all of the Pennsylvania Turnpike and New York Thruway are. Closer to Cold Spring Shops headquarters, the Illinois Tollway is able to extract its tribute from much of the freight traffic headed into or near Chicago, but look at the conditions of the U.S. highways and the in-city expressways. And I wonder how much of that traffic is headed from nearby warehouses or factories to container terminals in Chicago because of the difficulties railroads have in getting containers or container trains through Chicago (and don't get me started on oil and ethanol trains waiting to get through).

That traffic has to be contributing to the wear and tear on Interstate 65 in northwest Indiana, and to the deterioration of Milwaukee's interchanges (get past the Politico intrusion of presidential politics and focus on the infrastructure).

As the transportation bill takes center stage on Capitol Hill this week, we’re hearing plenty of impassioned speeches about the woeful state of American infrastructure, about the failure of our political system to invest in the future of our nation. But taxpayer-funded megaprojects like the Marquette and the Zoo are obvious reminders that America still does invest mightily in transportation infrastructure. It’s less obvious what all that investment is achieving, and for whom it’s being achieved. For all the debate over how much money to spend on transportation and how to raise the money, there’s been much less debate about how the money should be spent. When so much cash and concrete gets poured into the spaghetti bowl of freeways around Milwaukee, other needs tend to get neglected.

Today, we spend more than five times as many federal dollars on roads as we spend on public transit. We spend more building new road capacity than we spend fixing existing roads. Those priorities affect the competitiveness of our economy, the sustainability of our environment, the livability of our cities, and the mobility of the poor, not to mention the amount of time we spend banging our fists on our steering wheels in traffic and the likelihood that our bridges will collapse. But most of our transportation choices aren’t made in Washington. Congress is mostly a pass-through, funneling cash to states with relatively few strings attached.

It's too late to do much about the Marquette interchange, which the state recently rebuilt at great expense. The article does a before-and-after illustration of the effects of that interchange on downtown. But their picture of pre-expressway Milwaukee misses the most significant casualties of the expressway. We lost quite possibly the best railroad corridor service of the time, privately operated or otherwise, thanks to misguided public policy.

By the looks of things, the picture dates from the mid-1930s with construction of either the Safety Building or the County Court House beginning two blocks west of the Milwaukee Auditorium. Just out of view to the lower left: the right of way of the Rapid Transit Line, which the Expressway Commission appropriated after its abandonment in 1951 for the original East-West Freeway. Just out of view at lower right, adjacent to the Schroeder Hotel (still present, it's a Hilton) is the Milwaukee Terminal of the North Shore Line. Among the reasons the railroad petitioned to abandon: the costs it would incur modifying tracks entering the Terminal to make way for extensions of the East-West Freeway. A little further out of the picture is the Everett Street Depot of The Milwaukee Road, which had to go in order for the west throat tracks to be replaced with an entrance ramp for the Marquette Interchange complex. Along the lakefront, the North Western Depot had to go in order to provide space for a freeway that was built only in part (a lightly traveled elevated road over the municipal piers, and a bridge over the harbor entrance that when Lake Michigan is high is an obstacle to navigation, and don't get me started on the St. Lawrence Seaway, I want to post this tonight.)

But it is the reconstruction of the Zoo interchange that I want to address.

The Zoo is Wisconsin’s oldest and busiest interchange, carrying more than half the state’s freight, and one of the toughest to navigate. State transportation officials calculated that simply rebuilding it would cost about $900 million, but they settled on a $1.7 billion alternative that will add lanes, soften curves and widen shoulders. They believe the work will reduce accidents dramatically, while easing congestion that currently adds about five to seven minutes to the average rush-hour commute.

“The Zoo can’t handle what it’s being asked to handle now, and it’s only going to get worse,” says [Patrick] Goss, who was a transportation aide to former Republican Gov. Tommy Thompson before he began lobbying for the state’s road builders. “Sure, it’s a high-cost project, but you can’t take shortcuts with this kind of thing.”

That's intriguing, given that the Zoo is evidence of the expressway builders taking shortcuts earlier. Look carefully at this map of the wished-for expressway system, circa 1970. Under that system plan, commuters from the upscale northwestern suburbs in Washington, Ozaukee, and Waukesha counties would be able to head downtown either on the Zoo and East-West expressways, as they currently do, or to use the Fond du Lac expressway, which never got east of a few blocks west of the also-decayed Capitol Court Shopping Center, to choose one of several planned but never built expressways either downtown or to the factories that used to be along the railroads and river valleys. Those planned expressways are not likely ever to be built.

Thus the Zoo interchange handles more than the intended volume of commuters from the northwest suburbs, plus a lot of that truck traffic which might be coming from points west and northwest of Milwaukee that way rather than through Madison in order to reduce exposure to Illinois tolls.

There is also an important political implication of these findings. All but six states could finance Interstate modernization on their own, without federal funding. Few people realize that although federal gas taxes paid for 90 percent of the initial construction costs, these highways are owned by the states and operated by state Transportation departments. Since Congress has no realistic strategy for coming up with the trillion dollars an Interstate modernization program would require, states are going to need to step up to the plate.

There's only one obstacle to states taking on this responsibility. The original 1956 legislation still prohibits tolls on "existing" highway lanes. But it's perfectly legal for states to (1) convert carpool lanes to express toll lanes, and (2) add tolled lanes to the existing free lanes on Interstates.

In 1998, Congress enacted a pilot program to test tolled Interstate reconstruction. The law permits three states to each rebuild one Interstate highway using toll financing. Missouri, North Carolina, and Virginia won the three slots, but none has been able to gather enough legislative or public support to implement its project. North Carolina, for example, decided that Interstate 95 was its most-urgent candidate for reconstruction and widening. But people who live near I-95 objected strenuously to being singled out to pay tolls when their fellow citizens in, say, Charlotte would be able to use Interstate 77 for free. Virginia, after a similar backlash, proposed charging tolls only at the border with North Carolina, which would exempt all local users of I-95 from paying tolls. However, this would reduce expected revenues to below the amount needed to reconstruct the highway.

The trucking industry has been the primary opponent of expanded use of tolling on Interstates. It has some valid reasons to be concerned. Several of the states that applied for slots in the pilot program were intending to charge tolls far in excess of what would be required to reconstruct the single Interstate authorized under the program. Pennsylvania was rejected twice because it was clear its proposed tolling of Interstate 80 was intended not just to refurbish that one highway but also to generate about half a billion dollars per year to bail out transit systems across the state. Other highway user groups, such as AAA, have also mounted opposition to Interstate tolling. AAA's New York division has litigation in the works against the Port Authority of New York and New Jersey, for example, over the agency's use of toll revenues to rebuild the World Trade Center.

Transportation is a derived demand, and without destinations, including office towers, what's the point of having roads, whether privately owned, publicly maintained out of general revenues, or maintained by tolls. And the transportation economist in me suggests that Mr Poole doth protest too much about making users pay. Consider four objections he raises.

1. There would be no value added for users if tolls were simply imposed on existing, unimproved lanes.

By that logic, any introduction of high-occupancy toll lanes (the so-called Lexus lanes) is an error. Congestion pricing functions to allocate demand, and with care, can yield revenues to cover the long run incremental costs of maintenance or capacity expansion.

2. States could divert toll revenue to other purposes.

So what? Money is fungible. Perhaps improvements to commuter rail service or conduits for telecommunication and electricity or the municipal swimming pool keep residents from fleeing.

3. People would have to pay fuel taxes and tolls for the same highway, which would in effect be double taxation.

Ever hear of a three-part tariff? As it is, many people pay property taxes, fuel taxes, and tolls, all of which contribute to providing the roads they use (or stew in traffic on) under the existing regime.

4. Traffic would be diverted to parallel roadways.

Happens anyway. Happens even without tolls, as people adjust their behavior to perceived congestion conditions.

Now perhaps, as Mr Poole concludes, there's opportunity to move toward a more market-based regime of highway funding.

This would represent a substantial move back toward the original users-pay/users-benefit principle that has largely been discarded under the current federal highway and transit program. It's also the only game in town for ensuring that these critically important highways can be modernized to continue their vital function in the 21st century, notwithstanding the liberal dream of shifting freight from truck to rail and people from cars to high-speed trains. What's more, shifting responsibility for Interstate modernization from the federal government to the states would represent a significant (and achievable) first step toward devolving the overgrown federal transportation program.

And since toll-financed Interstates are ideal projects for long-term public-private partnerships, this plan could be used to begin converting major highways from the state-socialist enterprises they are today into market-oriented utilities, like those that furnish us with everything from electricity to the Internet. For libertarians, what's not to like?

The freight railroads are investor-owned (and often hostile to Passenger Rail operators.) Why shouldn't the trucking companies also bear the full cost of providing rights-of-way, the way the freight railroads already do. Might there be a way for the trucking companies to help pay for improvements to the Chicago area rail network in exchange for expedited handling of intermodal trains from railroad to railroad? I know the railroad companies are looking for more effective ways of anticipating and pathing run-through trains.